The U.S. Treasury has moved to withdraw two proposed crypto rules from 2020 and 2023 that would have expanded financial institutions’ reporting and recordkeeping duties for self-custody wallets and mixing transactions.
Summary
- FinCEN filed two withdrawal notices on Oct. 5, with formal publication scheduled for Oct. 6.
- The wallet proposal set separate $3,000 recordkeeping and $10,000 reporting thresholds.
- The agency cited concerns about lawful activity and compliance costs in withdrawing the mixer proposal.
- Coin Center welcomed the decision, calling it a victory for financial privacy.
FinCEN, the Treasury bureau responsible for enforcing the Bank Secrecy Act, said it would take no further action on its proposed wallet rule, while a separate notice withdrew both the mixer proposal and its underlying money laundering finding. Deputy Director Jimmy L. Kirby signed both documents, which were filed for public inspection on Oct. 5.
In explaining the wallet decision, the bureau cited the Trump administration’s efforts to ensure digital asset regulations are “fit-for-purpose.” Both notices referred to the July 2025 report from the President’s Working Group on Digital Asset Markets.
US Treasury drops wallet reporting and identity checks
According to the wallet notice, the December 2020 proposal would have required banks and money services businesses to collect information about certain crypto transfers involving wallets held outside regulated financial institutions.
Under the proposed framework, institutions would have kept transaction and counterparty records and verified their customer’s identity when a covered transfer exceeded $3,000. For transactions above $10,000, they would also have submitted a report to FinCEN, the notice explained.
The reporting threshold also covered several transactions totaling more than $10,000 within 24 hours. FinCEN’s notice listed deposits, withdrawals, exchanges, payments and other transfers among the activities covered by the proposal.
Beyond self-custody wallets, the bureau said the draft also covered wallets at foreign financial institutions outside the Bank Secrecy Act framework in jurisdictions identified by FinCEN.
When Treasury introduced the proposal in December 2020, it described the requirements as a response to gaps in anti-money laundering controls for certain digital asset transactions. The department sought additional records that could help authorities identify people involved in illicit transfers.
For American users, Coin Center’s objection centered on the personal information their banks or crypto service providers would have collected. The group argued that the proposal could require institutions to retain details about transaction counterparties who were not their customers.
FinCEN withdraws the foreign crypto mixing designation
In its separate notice, FinCEN withdrew the October 2023 finding that international convertible virtual currency mixing constituted a class of transactions of primary money laundering concern, alongside the proposed reporting measure attached to that finding.
The bureau had used Section 311 of the USA PATRIOT Act, which authorizes Treasury to impose special measures addressing specified foreign money laundering risks. In this instance, FinCEN proposed additional reporting and records for transactions involving mixing outside the United States.
Under the 2023 proposal, a covered institution would have reported a transaction when it knew, suspected, or had reason to suspect that foreign mixing was involved, according to the agency’s original announcement.
The withdrawal notice described a definition extending beyond named mixing services. FinCEN’s draft included pooling funds, splitting transfers, using single-use wallets, exchanging digital assets and delaying transactions when those activities obscured a transfer’s source, destination or amount.
FinCEN acknowledged commenters’ concerns that the definition could discourage legitimate activity and impose substantial reporting costs. Its notice also cited the White House working group’s recognition that lawful users may use mixers to protect privacy on public blockchains.
The agency nevertheless maintained that criminals use mixing tools to obstruct investigations. FinCEN said it would continue monitoring for money laundering, terrorist financing and other illicit financial activity and could take further action when appropriate.
Coin Center’s objections included domestic transactions
Coin Center called the withdrawals a “major win for financial privacy” in an Oct. 5 post by Jason Somensatto, after opposing both proposals through public comments and advocacy.
As crypto.news reported in January 2024, the organization had challenged the mixing proposal over its scope, treatment of domestic transactions and potential effects on lawful users. Coin Center argued that difficulty identifying a transaction’s location could prompt cautious institutions to report activity conducted entirely within the United States.
In that earlier challenge, the group questioned whether the proposal exceeded Section 311’s limits on transaction classes involving foreign jurisdictions. It also raised due process concerns about lawful activity receiving a money laundering designation without individual notice or a hearing.
A separate dispute over noncustodial software reached Congress in May 2024, when Senators Cynthia Lummis and Ron Wyden questioned money transmitter interpretations in a letter to then-Attorney General Merrick Garland.
According to the senators’ letter, a service needed control over customer assets to qualify as a money transmitter under the provision they cited. Wyden also warned that holding software developers responsible for users’ alleged criminal conduct could raise First Amendment concerns.
FinCEN’s recent scam analysis used existing financial reports
In coverage published Sep. 4, FinCEN identified suspicious scam activity totaling approximately $12.7 billion through 33,904 Bank Secrecy Act reports filed between September 2023 and December 2025.
The bureau said roughly 1,300 financial institutions submitted the reports. Money services businesses, mostly digital asset firms, filed 55% and identified $5.5 billion in suspicious activity, while banks reported another $6.4 billion.
FinCEN cautioned that the aggregate was not a direct measure of victim losses because reports could include attempted transfers, duplicate reporting, and filing errors. Its analysis identified victims across all 50 states and several U.S. territories.
According to the agency, victims sometimes funded fraudulent investments through retirement savings, home equity, mortgages, and personal loans. FinCEN said its Rapid Response Program had recovered just over $1 billion for 5,790 U.S. victims since 2015.
